Gulf 'Eurostar'-style rail project to cost $20-25bn

Dubai, September 30, 2009

The Gulf Arab rail network will cost between $20 billion and $25 billion, up from $14 billion, as the six oil producers seek to create a similar model to Europe's Eurostar, a regional official said on Wednesday.

Mohammed Obaid al-Mazrouie, assistant secretary general for economic affairs at the Gulf Co-operation Council (GCC), told Reuters he expected a detailed study for the project to be completed this year and construction to begin by 2010 or 2011.

'If we are done with the detailed study this year, realistically we will need five to six years to complete the project,' said Mazrouie.

Gulf Arab states are spending more than $100 billion on rail projects to ease congestion as they tackle poor public transport networks and growing populations.

The 1,940-km railway would connect Saudi Arabia, Bahrain, Kuwait, Oman, Qatar and the United Arab Emirates, each of which would contribute a share of the start-up capital.

Diesel-powered trains operating at speeds of up to 200 kilometres an hour would carry passengers and freight between the six countries, which are forming a regional economic bloc, including a common market, customs union and single currency, according to documents obtained by Reuters in November.

The first trains in the Gulf began operating in Dubai after the trade and tourism hub opened the initial phase of its $7.62 billion metro project in September. Other cities including Riyadh, Mecca and Kuwait are also planning rail systems.

'The project is very important,' said Mazrouie. 'It will have a positive impact on the economies, enhance mobility and the transport of goods, therefore advancing regional investment.'

Basing the project on the Eurostar model has contributed to increasing the cost, he said. 'It will be similar to Europe's Eurostar in that transportation will be smooth, no need to stop at borders, with certain requirements and procedures for the transport of goods and people,' he said. 'This is why the expense is more.'

The initial plan was to transport passengers in high-speed trains, he said, but a plan is in place to increase the number of tracks to transport goods via lower-speed trains, he said.

The United Arab Emirates and Saudi Arabia will handle most of the financing for the project, said Mazrouie, given they will have the longest tracks totalling 600 kilometres each.

Infrastructure will be handled by the governments, while the operation and maintenance of trains will be handled by private companies with a regulator from the government, he added.

French railway transport infrastructure services company Systra and Canada's CanRail are consultants for the project, Mazrouie said.

States in the world's biggest oil-exporting region have been booming on six years of high oil prices, which allowed them to funnel billions of dollars into infrastructure, industry and real estate. Yet the tumble of oil prices to about $70 from a peak of $147 in July 2008 is threatening to choke this boom.

However, international firms are likely to vie for the contracts to build a grassroots rail system with few areas globally offering the opportunity to do so.-Reuters